If you owe the bank £100, that's your problem. If you owe the bank £100 million, that's the banks problem.

Spain’s current problem with Youth Unemployment

Debt crisis…Bank bailouts… Country bailouts… even some confusing statistics about Government bonds. This is all we hear about when the Euro crisis is on the news, but the most important statistic is usually the least talked about: Unemployment. In Spain, this is their most troubling problem, with unemployment currently around 20%. But even more troubling is their youth unemployment statistics (Under 25 years old) which currently reads just under a whopping 50%.

That is nearly half of young people in Spain not working, which doesn’t inspire much faith in the Spanish government or education system (not much point in entering higher education if there isn’t a job at the end of the road). So what caused such astronomical unemployment figures?

One major cause was the housing bubble that existed in most western countries; this was exacerbated in Spain as they let their economy rely too heavily on tourism. Spain was pushed into building houses to host tourists to bring money into the country which in turn funded more holiday homes. A vicious cycle that relied heavily on tourists coming into their country, which promptly stopped once people realised it was a luxury they couldn’t afford. Some statistics to back this up, show that when the financial crisis hit, construction accounted for 13% of employment and 12% of GDP and that in the 10 years previous to this, both borrowing and prices for houses tripled. This had a big effect on youth unemployment, where previously construction was a reliable trade to enter into.

Another major cause is the strange labour laws that Spain had. Due to tight regulation it was hard to fire employees, which meant employers were less likely to hire them in the first place. Instead temporary workers are hired, where employees have to work with no strong security for their future. These temporary workers aren’t included in employment statistics, so it makes the numbers a bit inflated, but still shows a problem of a lack of long term stability in the labour market. A few days ago new labour reforms were released and were met with fierce protests from the public and on the face of it you can see why: giving employers more power over firing workers doesn’t seem to be helping the market. But maybe this might lead to more organisations employing people, as they now have more assurances that they can be flexible in the future. One example is in Germany, where labour laws are more lax and organisation were convinced to keep their staff on by lowering hours, this sort of co-operation was needed in Spain.

Youth unemployment can lead to some very negative impacts. One such impact is emigration, as young people looking for jobs feel they have better opportunities in other countries. This seems to be happening in Spain, where young potential employees are moving to the UK, Germany, France or even the USA. These countries don’t have particularly better employment rates, but it shows the complete lack of faith in Spain’s market. Another impact is that young people can become disillusioned with their surroundings and resort to crime; recent riots in the UK started in areas where unemployment was badly low and young Britons no longer had faith in the government to help them.

Spain aren’t alone, along with Greece they lead Southern Europe in poor employment prospects: Portugal currently have unemployment at just under 15%, Greece are just behind Spain with 18% while Italy are faring the best with around 8%. Check out the youth unemployment statistics and the southern states look even worse: Greece show nearly 50% as well, while Italy and Portugal are near the 30% mark. Their counterparts in central and northern Europe dealt with unemployment much better (excluding Ireland), with Germany using exports to keep their people in employment and the UK lucking out as there stricter construction laws meant the housing bubble didn’t quite have the same effect on employment as in Spain. So is there a lesson to be learned? From Britain no, low production and growth mean that unemployment is again rising. But from Germany yes, high exports have kept people in employment and good relations between the government and organisations meant that employees weren’t sacked when times were at their worst.

2 thoughts on “Spain’s current problem with Youth Unemployment”

Right now their main problem is a banking crisis and internal fracturing. Their banks need more security and the government doesn’t seem able to finance them, so the rest of ECB has announced it could intervene and finance banks directly, though Germany are backtracking somewhat on this. Internally, regions like Catalan are campaigning to become a separate sovereign state and many other regions are not keeping to the budget cuts, meaning Spain doesnt have much chance this year of cutting their large budget deficit. On top of this the government is reluctant to ask for the bailout it could possibly need.

Kane Prior

My name is Kane Prior and I like to write about economic issues from around the World. I am a graduate from the University of Kent with a 2.1 degree in Business and Economics. I hope to use this blog to gain interest in myself and maybe lead to some potential career someday. If you want to contact me I am on Twitter (just click on the image) and if you have any writing opportunities for me, then please feel free to drop a message.

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